PDF: City Auditor Memo
City contracts for waste services were bid improperly, may violate city code on length of contracts and may have involved favoritism, according to a city auditor's memorandum.
"We noted a timeline of events that indicate Chattanooga Transfer LLC was confident it would receive a contract from the city prior to the formal selection process," wrote City Auditor Stan Sewell in the July 7 memorandum.
The city holds two contracts for waste services, one with Environmental Materials LLC to have a private employee operate the scales at the city's landfill in Birchwood and the second with Chattanooga Transfer LLC to haul trash from a transfer station on Wisdom Street to the landfill.
Both companies are owned by businessman Ray Marler, who also owns a private landfill next to the Birchwood site.
In February, city officials admitted hauling dirt from Mr. Marler's landfill to cover trash at Birchwood without a contract. Since then, the city has been negotiating with the company on a contract.
But Mr. Sewell's memorandum and a 2-year-old audit suggest there could be more problems.
The 2008 city audit suggested that it was improper for a private employee to be manning the weight scale at the city's landfill. The report says having a third party take cash collections is an excessive level of risk.
Jerry Stewart, the city's director of waste resources, said Thursday that there are safety features in place when a private employee operates the scales at the landfill. He said the city installed cameras at the site based on the audit findings two years ago.
He said a computer system that monitors what goes in and out of the landfill can be checked at the Moccasin Bend Wastewater Treatment Plant. Cash receipts also are checked daily, he said.
Mr. Marler said last week that "nobody's doing anything illegal."
He said state regulators inspect his facilities regularly and the company has "an excellent record with the state of Tennessee."
"We have nothing to hide," Mr. Marler said.
AUDITOR FINDINGS
Mr. Sewell's memorandum pointed to his report on the landfill from two years ago and detailed some potential faults with the Chattanooga Transfer LLC contract. The 10-year contract provides for two five-year renewals.
The memorandum said the City Council ratified the contract in 2005 even though it appeared the "city code was violated regarding the maximum term allowed for a requirements contract." A search of city code did not show any maximum requirements on bids.
Additionally, he wrote, "We reviewed procurement documents that seem to indicate the contract was not properly (competitively) bid."
Mr. Sewell also wrote that Chattanooga Transfer LLC made a substantial capital investment in building on its property in 2004, just months before getting the city contract. He said it could have been a normal business risk, but it was "substantial."
The city's contract with Environmental Materials LLC also expired in 2008, records show.
The memo states that the matter has been forwarded to the City Council's Internal Audit Committee to be considered for a full-blown audit.
CITY RESPONSE
Mr. Stewart said the city attorney's office is drafting a new contract with Environmental Materials LLC.
He said the contract for Chattanooga Transfer was competitively bid and the fact that two companies owned by one person are doing business with the city is not problematic.
"It went through the bid process," Mr. Stewart said. "That's the way I look at that."
City Attorney Mike McMahan said Friday he knew of nothing that limits contracts.
"Five years is what we usually do," he said.
In the case of Chattanooga Transfer LLC, it was proper for the company to get a longer contract because it made a substantial investment in building the property and servicing the city, he said.
"Chattanooga Transfer is a perfect example," Mr. McMahan said.
Continue reading by following these links to related stories:
Article: Harrison landfill heads to showdown